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What We Learned from Obama's Tax Speech

Monday, July 09, 2012

President Obama announced on Monday that he would seek a one-year extension of the Bush-era tax cuts for people making less than $250,000 a year. The cuts would expire at the end of 2012 for people earning more than $250,000 – a 4.6 percent increase to the top tax rate that’s estimated to bring in $850 billion in revenue over the next decade.

This debate should be agonizingly familiar by now: it’s the same conversation we had about the Bush tax cuts back in the fall of 2010; it’s the same sally that accompanied the deficit-reduction deadlines we set for ourselves (and promptly ignored) last November; it’s a lot like the conversation about extending the payroll tax cut, which we’ve had twice in the last 8 months.

Democrats want to raise taxes on the wealthiest Americans. Republicans don’t. In this light, it’s no surprise that a new Pew Research poll shows that a majority of Americans find the presidential campaign “too long and dull” – look no further than Monday’s “news” for an explanation the lack of interest.

Because this is not news. We’ve long known where both parties stand. We’ve been offered plenty of solutions from politicians, pundits, candidates, think-tankers, Simpson-Bowles, and on and on. (Look no further than here and here for some examples.) Washington just hasn’t been keen on accepting any of them.

“It’s not a lack of plans or ideas,” President Obama said, “it’s a stalemate in this town, in Washington, between two very different views about which direction go in as a country. Nowhere is this more pronounced than on the issue of taxes.”

He’s got that right. Not only are there two very different views about the way forward, there are two very different narratives about the road we’ve traveled, a discrepancy the President addressed Monday.

“I’ve cut taxes for the middle class every year that I’ve been president,” Obama said. “Since I’ve been in office, we’ve cut taxes for the typical middle class family by $3,600 – I wanted to repeat that because sometimes there’s a little bit of misinformation out there. Folks seem to be confused about it.”

Obama predicted the GOP talking points to the contrary of his tax plan: that it will hurt small businesses and slow economic growth as job creators have to give more of their money to the federal government.

Obama argued that he had cut taxes on small businesses 18 times during his term in office. To the point about job creators, he stressed that the tax increase was simply a return to the way we did business under President Clinton – when the top tax rate was 39.6 percent.

“Back when the economy created 23 million jobs, the biggest surplus in history, and plenty of millionaires to boot,” Obama added.

If there was one new element to Obama’s argument on Monday, it was his suggesting that the tax cut extension for higher-income earners could be its own debate, one that happens after the election in November.

“We can have that debate,” Obama said. “But let’s not hold up working on the thing we already agree on. In many ways, the fate of the tax cuts [for the wealthiest Americans] will be decided by the outcome of the next election. My opponent will fight to keep them in place; I will fight to end them. But that argument shouldn’t threaten you. It shouldn’t threaten 98 percent of Americans who just want to know their taxes won’t go up next year.”

President Obama said he would sign a bill extending the Bush tax cuts for people making less than $250,000 “tomorrow.” Even with the offer to have a separate debate about the cuts for high-income earners, history tells us House Republicans won’t have that bill ready for him Tuesday morning.

“We're looking forward to the conversation with the White House over extending all of the current rates,” said House Speaker John Boehner – in November, 2010, when we were having the exact same debate.

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Comments [4]

Paul J. Bosco
from Manhattan

Congratulations, LES WEILER. You almost got it right. People making $300K a year will probably see no difference in their taxes, because their TAXABLE income is likely to be under 250K. How strange that Obama doesn't point this out himself. The President is not proposing to end the Bush tax cuts. Effectively, he is CAPPING them at about $7000.

As for the commenter called "LISTENER", I am sick of talk of "uncertainty" holding back "our small businesses". I am a Manhattan storekeeper. This uncertainty crap is just myth -- a word Republicans have been taught by Frank Lunt to utter at every chance. If --my lips to God's ears-- I were making $1 million a year, taxable income, and my shipping clerks were collapsing from overwork and falling behind on mailing out packages, I'd hire another clerk; it would be 100% irrelevant, that the marginal tax rate might rise from 35% to 39.6%. Any businessman, Republican, Democrat or Socialist, would tell you that.

what the president proposed is keeping the tax cut for the first 250k of income. EVERYONE, even Mitt Romney, benefits from this. The president is asking to allow the rate on income above 250k to return to surplus-era tax rate (which is still nearly half the rate we would have paid under Eisenhower).

One-year extension of the Bush-era tax cuts, two year work permits for 800,000 illegal aliens, tax and increases with Obamacare depending on what states reject it and the President picking and choosing what laws he will enforce or ignore.

The only thing Obama offers is more uncertainty which is destructive of business growth.

His political selfishness is the only thing motivating him at this point.

$850B over 10 years?? That's all changing the marginal rate from 35 to 39.6% will get us? Close more loopholes. Find a way to spend less money. Hell, we could probably find a way to cut Defense by $850B over 10 years...It IS $700B/yr.

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